It's a typical middle-class trait is to be willing to expend extraordinary amounts of energy and concentration on reducing costs, but not a commensurate amount of engergy on growing revenue-producing capacity. Drive to Costco, buy big lots, etc, without really calculating the costs (fuel, time, inventory management) associated with realizing these. People who bill at $60 an hour do work at home for which they could pay $20, because subbing it out seems haughty.
This is partly because spending is thought of as waste, and therefore to be controlled, while there's somethiing vaguely distasteful if not downright immoral (getting home late, neglecting kids) about working too hard to make money.
People will talk endlessly about how much money they save, it's a competitive sport, particularly amongst the ladies. But discussing how much you earn is greatly deprecated, it's just not done.
What it all adds up to is a lot of false economies: people work so hard at saving money that they don't learn to earn more, and net net it's counterproductive. And yeah, there's a moral component to it: reducing costs is aligned with environmental preservation, while making money correlates to consumption, which is destructive. But that's stupid. If you earn more, you can spend more on purchasing the same items at more expensive and more convenient stores. Or on more expensive items. The difference is that you develop earnings capacity rather than savings capacity.
I'm sure the behavioral economists have attacked this asymmetry, I just haven't read it. Shit, this is obvious to everyone.
Wednesday, June 22, 2005
Expense aversion asymmetry
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2 comments:
I am reading a book called Small is Beautiful, Economics as if People Mattered by EF Shumacher. It points out the fallacy that life is better simply because you consume more units of something. When I finish the book, I will let you know if you are right.
Hmm, senor RC. I'm not sure what I'm supposed to be right about vis-a-vis consuming units. I'm not explicitly in favor of consuming more units in general, though specific items (Cheerwine, hush puppies, spicy tuna roll) do come to mind as worthwhile. All I'm saying is that there's an irrational imbalance in the way people project savings vs. earnings.
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